Just in case anyone is worried about the upcoming 4 dollar a gallon gas prices, here is yet another reason to introduce draconian limits to our mad dash to the outskirts.
I suppose that the Republican politics of the past decade has probably kept the idea of Peak Oil out of the mainstream of Jacksonville discussion, but it is a real concern, and it appears to have been accelerated in the past few years, especially in light of the rapid chinese/indian industrialization programs.
The oil, to put it flatly is going to explode in prices, liberal muckraker Greg Palast's conspiracy claims notwithstanding.
http://en.wikipedia.org/wiki/Peak_oil
and here is a recent article updating the public pronouncements.
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SIMMONS SPELLS IT OUT - BUT WHEN WILL THE OSTRICHES GET THEIR HEADS OUT OF THE SAND?
12:53 - 05 November 2007
In A private meeting with Matt Simmons, president of the energy bank, Simmons & Co International, Energy has been told that the petroleum game is up. And even if it proves possible to raise global oil output further, it will be for only a short time.
Simmons said he regretted not making his predictions for the future of Big Oil much more dire than had been portrayed in his controversial book, Twilight in the Desert, published two years ago.
"If I was redoing Twilight in the Desert today, I'd sharpen the severity of the warning quite significantly.
"May, 2005, still stands out as the all-time record high for global crude production ??? 74.3million barrels per day, and now we're down 1.2million barrels per day. The IEA shrug that off, saying that if you look back over the last few years, records have been set several times; a peak followed by a falling off, then another peak, and so forth.
"That's an interesting thesis. But as we watch Mexico start into its big-time decline and UK and Norway continue their rapid declines, plus Indonesia, Egypt, Argentina and others besides ??? you can see several years of relentless decline. Add them up and say, find me one area coming on in the next few years that will halt such a collective decline ??? it's just not there.
"Major oil companies have quadrupled their spending over the past five years and, other than acquisitions, basically they're in liquidation."
Simmons reiterated his tough stance on drilling, which is the key to unlocking new resources. Given the criticality of a sustained offshore effort in that regard, he said the level of understanding of the current rig crisis and the need for renewal, let alone growing the global fleet was woeful.
"We had our two-day conference at Gleneagles at Offshore Europe time and what impressed institutional investors the most was just how tight order books are for offshore rigs and how long that order book is going to stay intact. I had a long talk with one of the senior guys from National Oilwell. He said, 'I don't think your audience quite understood what I was talking about'.
"He said, for example, that a thorough survey of all the jack-up systems in the world (for jack-up rigs) revealed that a very high percentage are performing jacking operations far beyond the original design life of their jacking systems. 'They're obsolete', he said.
"I look around the system and have come to the view that we're right out of capacity."
On "Great White Hope" projects, Simmons was equally scathing.
"What about Kashagan ??? or Cashisgone, as it's now being called. If I were the Kazakh government, I'd take the project away from these guys (the Eni-led consortium).
"Given the terms of the project and given the extraordinary high costs, it could be 2040 before the Kazakh government gets any proceeds off the project. But that begs the question: should we even be doing such complicated projects and at such a cost when Kashagan might not even work?"
Because of his views, Simmons attracts plenty of criticism. He is even accused of not having a clue about what he is talking about. But he shrugs it off.
"I have the luxury of having a highly detailed track record ??? look at the talks I've given and see how controversial they were at the time. Then pick me one that was wrong.
"One that I occasionally get pointed to as being probably the biggest mistake I ever made ??? a paper I did back in 1997 on the case for 450 more offshore rigs. What I basically said is that, if we want, 10 years from now, to have a platform from which to continue growing offshore oil supplies, we obviously need more rigs.
"The question is: 'How many would we need?' I remember spending a weekend going through a fairly careful methodology and thinking through some basic assumptions. And I finally added the numbers up and said that, to be in good shape by 2007, there would be the need for 450 offshore rigs.
"Whatever the number, fact is that we're now in 2007 and we have no excess rigs and there's going to have to be massive attrition as the rust-buckets fall apart."
Another line that Simmons is regularly hammered on is depletion rates of fields that have peaked.
Picking on a new CERA (Cambridge Energy Research Associates) report that points to decline rates across several hundred oilfields of 4.5% per annum, Simmons challenged CERA to come clean on how it arrived at such a number.
"I was talking 4.5% more than a decade ago and decline rates have turned out to be a lot greater than that ??? 10% and more. Then they're (CERA) saying that decline rates are not increasing with time.
"In May, 2005, they came up with a report saying that, based on the most detailed field-by-field study, between now and 2010 the world would add 16.4million barrels a day of new supplies!"
The Simmons view is that, with few exceptions, everyone is going flat out in an attempt to stem decline.
"I continue to watch table six of the EIA (US Energy Information Administration) monthly report. If you look at Saudi Arabia's imports into the OECD, there is a fairly steady decline over the past four years. There is no sign that, a year ago, they cut back (output) by a million barrels per day. That's significant."
Stephen: You dont have to fall for every conspiracy theory which comes down the pike. ;D
Will we eventually run out of large quantities of oil? Sure. But it will be a gradual thing and not catastrophic as some imagine because the higher prices which will come first will lead to innovation and reduce or eliminate the need for oil anyway. At this time, the prices dont really seem that bad though when you adjust for inflation and remember that gas cost $1 a gallon in 1980 when everyone made 1/3 to 1/4 what they do now. Also, a good portion of the oil price run up has to do with the falling dollar (which was lamented in another thread). Since oil is an internationally traded commodity, if the dollar falls in value oil will rise in value relative to the dollar. So, the two have an inverse relationship. And remember, gas costs $7+ per gallon right now in much of Europe due to taxes and they are not in crisis. Where is the problem again?
Quote from: stephendare on November 26, 2007, 05:19:28 PM
River,
Europe rebuilt its infrastructure (with US money) after WW2. They opted for tightly centralized efficient planning and aimed for carless cities early.
Even their industrial infrastructure was rebuilt along newer fuel efficient lines to compensate for the new economic realities after the war.
The US, however, did not.
The center of European cities are certainly very dense and compact but this is because they were built before the advent of the automobile and even the train in most cases. So, people were commuting either on foot or on horseback and needed to be very close to work. While the historic cores are very scenic, it is clear that even in Europe sprawl is the rule with the newly developed edges of cities. I have seen it first hand in France, Germany, Italy, Britain and elsewhere. I can also provide photos if needed. And, all of this sprawl coexists with $7+ per gallon gas.
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Not even in the 80s, when the Japanese began buying so many of our steel mills and foundries. We represented a whole lot of industry bankruptcies River and viewed the disposition of alot of the properties in the late 90s. Many of them had been continuously working since the 1890s, using the same outdated process and hardware.
Not much has changed since then. Its one of the reasons that the per capita energy consumption is so much higher in the US.
Per capita energy use in the US is the highest in the world because we have the highest standard of living (i.e. more living space, more gadgets, central heat and air, etc, etc). And, I wouldnt trade it for anything. I wouldnt mind seeing more energy generated by nuclear power though.
BTW, US industrial output is the highest now that it has ever been. It is just that it takes far less workers to produce so much as compared with 1950 and they produce different things than just cars, ships and steel. They also produce more value added goods in many cases.
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That and suburban planning and sprawl. Americans drive further for employment and basic needs than any other people in the world. We didnt plan our cities for mass transit after the 1940s, we planned them for autos.
See above. This is a worldwide phenomenon. Apparently a large number of people worldwide actually prefer sprawl. Personally I prefer the suburbs circa 1920, i.e. Riverside, Avondale, Springfield, San Marco, etc.
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Also, it is ludicrous to claim that anyone besides the ultra rich made three or four times less money 20 years ago. Ludicrous.
I think that this is going to be one of those contributing factors to economic crunch.
Actually, on average, American men in 1980 made $12,530 in 1980 dollars. By 2004, the average man was making $30,513. American women saw even more dramatic gains making nearly four times more in nominal income in 2004 than they did in 1980. Adjusted for inflation, the gains are still very strong for all groups. See this chart for more information:
Quote1950(1950 $'s, 2004 $'s) 1960(1960 $'s, 2004 $'s) 1970(1970 $'s, 2004 $) 1980(1980 $'s, 2004 $'s) 1990(1990 $'s, 2004 $'s) 2000(2000 $'s, 2004 $'s) 2004(2004 $'s)
Overall Male 2 570(17 077) 4 080(22 051) 6 670(28 100) 12 530(27 206) 20 293(28 439) 28 343(31 089) 30 513
Female 953(6 333) 1 261(6 815) 2 237(9 424) 4 920(10 683) 10 070(14 112) 16 063(17 619) 17 629
http://en.wikipedia.org/wiki/Personal_income_in_the_United_States
When you consider the additional buying power today of US consumers, the gas price spike doesnt seem so dramatic, now does it?
Quote from: stephendare on November 26, 2007, 05:24:28 PM
And river, not to put a fine point on it, I think by now we have a certain track record on the outcomes of events. So far, I am way ahead of you in predicting the likely outcomes of our national politics.
If by 'fall for every conspiracy that comes along" you refer to using misinformation and incorrectly guage the likely outcome, I would suggest a little housecleaning is in order.
lol
stephen.
I really cant imagine what you are talking about.
This article is a little outdated, but the idea still holds true:
QuoteGas prices too high? Not by historical standards
By Mark J. Perry
If you're like most Americans, you have probably found yourself complaining lately about the high price of gasoline â€" especially if you just spent a day or two in the car over Memorial Day weekend.
A USA TODAY/CNN/Gallup Poll in May found that 59% of those surveyed said high gas prices had caused a hardship on them.
You might even find yourself longing for the good old days of cheap gas. If so, think again. Gas prices today, by any measure that adjusts for inflation and rising real income, are a bargain.
Gas prices appear to be at a historical high, and prices of the past appear to be cheap (17 cents per gallon in the 1930s, a quarter in the 1950s and 50 cents in the 1970s). But this is a classic example of "money illusion." In real inflation-adjusted dollars, gas prices are the same or lower today than in most previous decades.
Measured in real dollars, gas prices peaked in March 1981 at more than $3 per gallon. We have not even come close to paying the highest real gas price in history â€" today's prices are still 30% below the all-time high.
We can compare gas prices over time by calculating the cost of 1,000 gallons of gas purchased at the average price in a given year, as a percentage of per-capita disposable income in that year. For example, in 1935, when gas prices were 17 cents per gallon and annual disposable income was $466, the cost of 1,000 gallons of gas was 36% of average disposable income. Today, it takes less than 7% of our disposable income to buy 1,000 gallons of gas at the current $2.10 a gallon. The "cheap" gas of the '60s and '70s cost about 12% as a share of income.
Prices stable
Gas prices since the mid-1980s have not only been more affordable as a share of income than at any time, they also have been remarkably stable. The recent small increase in gas prices relative to income is fairly insignificant.
Further, we can avoid money illusion by pricing gas in "minutes of work at the average wage per gallon of gas," instead of dollars per gallon. Priced in minutes per gallon, you certainly wouldn't be longing for yesteryear's gas prices.
A typical American working today at the average hourly wage of $17.50 works about seven minutes to buy a gallon of gas for $2.10. In contrast, the average worker in the 1930s worked more than 20 minutes to buy a gallon of gas. During the 1940s, it took 12 minutes of work. During the 1950s, it took about 10 minutes per gallon.
Cost in minutes
Americans are paying about the same for gas in minutes per gallon today (7.2 minutes) as during the 1970s, when the retail price was only 40 cents per gallon, and much less than during the early 1980s (more than 10 minutes per gallon) when real gas prices peaked.
Finally, consider the consumers in most other countries. With the exception of members of the Organization of Petroleum Exporting Countries, such as Iran, U.S. gas prices are lower than almost anywhere in the world.
Go to Europe and you'll pay from $5 to $7 per gallon â€" even in Finland and the United Kingdom, which are major oil producers and exporters. In Mexico, the world's fourth-largest oil producer, they pay $3.20 per gallon, about the same as in India, Brazil and Singapore.
Consumers might have a lot of gripes to justifiably complain about, but the illusory high price of gas is not one of them.
The good old days of cheap U.S. gas are here now.
Mark J. Perry is a professor of finance and economics at the University of Michigan-Flint and an adjunct scholar at the Mackinac Center for Public Policy in Midland, Mich.
http://www.usatoday.com/news/opinion/editorials/2005-05-31-gas-prices-edit_x.htm
A little more on this topic:
QuoteCompared to the early 1970s, the economy today is about twice as efficient, measured by energy consumption per dollar of real GDP. The graph in that post was featured on CNBC's "Kudlow and Company" a few weeks ago and also appeared in Larry's blog.
Here's another reason that the Goldilocks economy is able to handle $3 per gallon gas without sending consumer spending into a tailspin and without causing a recession: Even at $3 per gallon, gas is still relatively affordable for today's consumers, as a percent of disposable income, especially compared to the 1970s and 1980s.
The graph above (click to enlarge) shows the cost of 1,000 gallons of gas at the average retail price (using EIA data) as a percent of per-capita disposable income (from the BEA), from 1974-2007. Consider that since gas prices peaked in the early 1981 at about $1.40 per gallon, retail gas prices have increased by 2.21 times to $3.099 per gallon today. But per-capita disposable income has increased during that same period by more than 3.5 times, from $9591 in 1981 to $33,940 today.
In the early 1980s, it would have taken almost 15% of per-capita disposable income to buy 1,000 gallons of gas, and today it only takes only 8.5% (third quarter 2007). Even back in the "good old days" when gas sold for 50-60 cents per gallon in the mid-1970s, gas was more expensive as a share of income (10-11%) than today.
Bottom Line: Measured as a share of per-capita disposable income, gas prices would have to rise all the way to $5 per gallon today to be as expensive as gas in the early 1980s. Even if gas gets to $3.76 per gallon, it would be equivalent to 50 cent gas in the "good old days" of the mid-1970s, when measured as a share of disposable income.
http://mjperry.blogspot.com/